This Is Not 2008

If one more person writes or talks or blogs that nothing has changed since Lehman Brothers collapsed and that we are still in dangerous territory, I think I will scream. If one more person says we are still in a "too big to fail" scenario, I am tempted to want to rip their lungs out.

Five years ago, Lehman collapsed. I don't want to re-hash it. It was a mistake, there should have been something done by the feds, but things were happening with a level of speed that was hard to comprehend. Lehman was a real firm that had real shareholders and two real suitors, the Koreans and Barclays. It was run by someone who was trusted and tough. The books were opaque. It collapsed, another victim of the endless belief that housing could never go down in value.

Anyway, Merrill Lynch and American International Group (AIG) were going to go too, so why don't we just say two out of three ain't bad?

But it's the repulsive idea that nothing has been done to improve the situation that I find so outrageous. First, our banks were forced to raise a level of capital that was extraordinary. I still can't believe that the banking chieftains weren't able to battle the Treasury and the Fed and stop the dilution. Plus, the fact that all the banks had to do it sent a message: You aren't in charge anymore, the regulators are.

It's been that way ever since. Banks that were swinging around capital like it was theirs have stopped doing so and have recognized that it's the depositors' money. The big investment banks without the deposit base have dramatically reduced their leverage, too. Again, this is in response to the regulators. The leverage in the system has been cut back severely from reckless lending and outrageous buying of debt to boost returns. It doesn't happen much anymore, but the critics refuse to recognize that. The stock market does, however, and any company that borrows too much to make the quarter is treated like the son of Lehman, married to MF Global.

So the idea that the banks are as thinly capitalized as they were five years ago -- and I hear that all of the time -- is ignorant and stupid.

Second, things are much less opaque then they were. Loans aren't hidden anymore. It is true that the banks have been able to stymie the regulators over the right to keep derivatives hidden and off-board. That's horrendous, and the president should just get involved and hammer this out. That's the biggest weakness in the system. But it isn't enough to make me feel that the collapse could happen all over again.

Third, their capital is still being raised. One of the reasons the economy isn't stronger is that the banks fear the regulators. They keep capital in the door to keep the regulators at bay. Plus, banks don't keep many mortgages on the books at all. They sell them to Fannie Mae. So bad mortgage loans won't come back to haunt them.

Look, you want to fear something? Fear European banks. The regulators have no spine over there. We're much tougher and much more secure. Yes, I would have liked to see jail time for the most egregious executives. They got away with murder. That makes someone more likely to commit fraud, not a good thing.

But I put all of these negatives out there so you don't think I missed them. All are reined in by the amount of capital that needs to be kept on the books and the ferocious ways that the regulators are examining the books. Not to mention all the legal glare for every non-traditional revenue.

A huge behavioral change, coupled with dramatic increases in capital, is the legacy of what occurred five years ago. That's precisely what was needed. Everyone accepted that if we could get those two to occur, we would be safer. Now that we have them, it doesn't seem to matter to the critics. They want too much. I think that Tim Geithner and Ben Bernanke performed magnificently by putting in safeguards that have meant a major difference to the security of the system. Plus, the government now has the emergency powers to take over a bank if all else fails.

What more can you ask for? Nationalization? Give me a break. Things are better and stronger than they have ever been. Time to stop talking and start admitting that the president's team and the Fed got it right, and we owe them a ton of gratitude for all they have done to save the system from the scoundrels and cads who got us into this jam in the first place.

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